Extensions: Competition and Time Delay Effects

Alexander Vollert
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Alexander Vollert: Universität Karlsruhe (TH)

Chapter 5 in A Stochastic Control Framework for Real Options in Strategic Evaluation, 2003, pp 129-168 from Springer

Abstract: Abstract So far the discussion has dealt with several examples of how to use the stochastic control framework to value real options, and how to display real option interactions by means of the graphical representation of the contingency structure. In this chapter several recent advances in real option pricing are included in the framework. Paralleling the conceptual framework of real options of Section 2.2.2, some assumptions will be relaxed in order to take account of competition and time delay effects in the stochastic control framework. The presentation of these topics will concentrate on the application of the methods rather than on mathematical thoroughness. Thus, there are no proofs provided for the extensions of the generalized timing and switching options of Sections 3.3 and 3.4. Although some of the necessary proofs would not be trivial, their contribution to the valuation and analysis of option interactions we focus on would be limited.

Keywords: Cash Flow; Real Option; Construction Phase; Demand Parameter; Equivalent Martingale Measure (search for similar items in EconPapers)
Date: 2003
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-1-4612-2068-8_5

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DOI: 10.1007/978-1-4612-2068-8_5

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